Can someone explain Tether?

[chesthing]

So I went to the Tether website and there is no way to buy or sell USDT for or to USD. Rather, the only way I see to buy it is to go to an exchange like Binance and use bitcoin to buy usdt. The only way to sell usdt is to sell it back to bitcoin on an exchange. Tether does not deal with USD whatsoever, not directly nor through exchanges.
Is this correct? because if it is, where is the USD that are supposed to be backing all these usdt tokens coming from? and how are they able to print new usdt at will - where is the usd coming from to support these new usdt tokens? Apparently there isn't even a way to create a wallet on Tether.io much less be able to buy or sell them for usd. https://wallet.tether.to/app/#!/signup
I'm really confused by this, please explain.

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[vit05]

The usefulness of Tether is to give liquidity to the exchanges, not to the consumer. Bitmex has a recent study on their cash and everything leads one to believe that they have the reserves they claim to own. This is a guarantee for the exchanges that use this product.

There are no guarantees for the consumer. Or how to directly withdraw this resource in your local currency. it would depend on each exchange accepting this conversion.

But of course there are several opinions on the possibilities of Tether have been used to manipulate the volume and that is why several alternatives have appeared in recent months.

https://blog.bitmex.com/tether/

Conclusion
History has shown that centralised systems with certain characteristics (censorship resistance or anonymous transactions) tend to get shut down by the authorities. Tether shares some of the same characteristics as these extinguished services so it may also attract criminals and ultimately suffer the same fate.

In our view, Tether has two choices:

Reform the system to include KYC/AML procedures that allow the operator to easily block transactions or freeze funds. In order to do this, Tether may need to fundamentally change its technological architecture and perhaps leave the public blockchains. Essentially, Tether would just be turning into a traditional (or full-reserve) bank.
Continue as is and risk being be shut down by the authorities at some point.
If Tether is shut down, there is a risk that some users may lose access to their funds, perhaps temporarily. We do not recommend holding Tether for the long term, but not for the reasons some of the sceptics typically pronounce. We think that criminal usage of Tether is likely to be relatively low because of the use of Tether for financial speculation, which is probably the system’s dominant use case. Furthermore, we have not found any evidence of criminals using Tether to launder funds. As it stands, we think an imminent shutdown is unlikely.

The case studies above illustrate the two angles to censorship resistance (individual transactions and the system as a whole) and what distributed crypto tokens need to achieve in order to be sustainable in the long run. If a payment system cannot block transactions, doesn’t require permission for use, or offers anonymous use, it will probably eventually be shut down. This could be just as true for systems like Tether and Ripple as it was for Liberty Reserve, E-gold, and DigiCash. A potential way around this is to try to build a distributed system that cannot be shut down (i.e., censorship resistance for the system as a whole).  Whether Bitcoin or other proof-of-work-based systems can achieve this is still unproven, in our view.

[chesthing]

I understand the purpose and use of Tether, it is to allow traders to get into and out of crypto markets without cashing out directly to fiat. What doesn't make sense to me is if usdt is never been bought directly with usd then where does the usd come from to back up each usdt? and if usdt is never sold directly back to usd, why does it even matter whether Tether can cover existing usdt with usd in bank accounts? This is where my brain starts hurting because I just can't get my head wrapped around how this has worked over the last few years. It seems like it's way too easy for usdt created from nothing to have pumped the 2017 market and is keeping the markets from collapsing here in 2018. What am I missing that contradicts that this isn't what has happened?

[vit05]

What doesn't make sense to me is if usdt is never been bought directly with usd then where does the usd come from to back up each usdt?

Exchanges buy Tether directly using USD. They must send USD to the Tether bank account and receive Tether in return.

As I said, it is a product for companies, not for consumers.

I do not want to defend this product because I find it very bad and insecure. Moreover, I believe in the great possibility of it being enormously used for money laundering and tax evasion.

But what needs to always be clear is that it is not a stable coin for the consumer. It is only a guarantee for exchanges. A more practical way of managing a business and getting away from taxation and enforcement.

It is quite common for banks and governments to freeze exchange accounts and companies that work with cryptocurrencies. In this case, the Tether appears as a facilitator to escape this.

[itssawai]

As the above reply mentioned Tether is to provide liquidity to exchanges, not to the user. Also recently Tether has released a transparency report to justify their claim to be backed by USD.

https://tether.to/fss-report-transparency-update/

Here you can see some interesting quotes from the report:

To address allegations head on, we wish to make a few things clear: All Tethers in circulation are fully backed by USD reserves. Full stop. Memoranda, consulting reports, industry leaders, cryptocurrency pioneers, and competitors have all confirmed this. Reserves have always, and will always, match the number of Tethers in circulation.

Tether and Bitfinex have both, since day one, maintained strong, open relationships with banks, financial institutions, regulators, government agencies, and law enforcement. We are not alone here; this is standard practice for any globally compliant financial platform with millions of users around the world.

It is also mentioned in this report with the link that FSS, a Washington based law firm conducted an interview and investigated Tether and it's bank accounts.
FSS Report link: https://tether.to/wp-content/uploads/2018/06/FSS1JUN18-Account-Snapshot-Statement-final-15JUN18.pdf

This FSS report confirmed that all Tethers in circulation as of June 1, 2018 are fully backed by existing USD reserves.

You can check out these reports completely and do further research on it but as of now, Tether is completely backed by USD.

[chesthing]

Is any proof out there that exchanges have actually provided real usd to exchange for the usdt tokens? and where does this usd come from - exchanges offering usdt do not offer usd trading nor .deal directly with usd fiat from customers in any way. If the exchanges are selling crypto for usd some place outside of their own exchange then using that usd to attain usdt is there any proof of this? because if all we have is the theory that this is how it's supposed to work, that doesn't cut it.

[sanacaks]

Thanks for asking, now I also understand its uses more.For me Tether was only a stable coin to change on crazy market condition, or Its a way for buying digital dollars for buying crypto on right time. Nowadays Turkish Lira is loosing value  to USD. So I keep watching lower Tether/TL value to buy more Tether on stock.

[Jannn]

As the above reply mentioned Tether is to provide liquidity to exchanges, not to the user. Also recently Tether has released a transparency report to justify their claim to be backed by USD.

https://tether.to/fss-report-transparency-update/

Here you can see some interesting quotes from the report:

To address allegations head on, we wish to make a few things clear: All Tethers in circulation are fully backed by USD reserves. Full stop. Memoranda, consulting reports, industry leaders, cryptocurrency pioneers, and competitors have all confirmed this. Reserves have always, and will always, match the number of Tethers in circulation.

Tether and Bitfinex have both, since day one, maintained strong, open relationships with banks, financial institutions, regulators, government agencies, and law enforcement. We are not alone here; this is standard practice for any globally compliant financial platform with millions of users around the world.

It is also mentioned in this report with the link that FSS, a Washington based law firm conducted an interview and investigated Tether and it's bank accounts.
FSS Report link: https://tether.to/wp-content/uploads/2018/06/FSS1JUN18-Account-Snapshot-Statement-final-15JUN18.pdf

This FSS report confirmed that all Tethers in circulation as of June 1, 2018 are fully backed by existing USD reserves.

You can check out these reports completely and do further research on it but as of now, Tether is completely backed by USD.

Anybody got any clue where this USD actually comes from though? I understand that Tether means your money is literally covered 1:1 with fiat USD of the same amount, but there is no real information explaining how this process works, or what the driving force behind it is?

[chesthing]

There is a lot of fear that unbacked usdt has been the driving force behind the recent crypto pump. If this turns out to be true this will be 100x worse than mt gox disaster for crypto. The fact that Tether nor Bitfinex has allowed their bank accounts to be examined by an independed source is extremely suspicious. The fact that newly minted usdt continues to be used to prop up the markets without any explanation as to where the usd is coming from is extremely suspicious. The fact there is no way for an individual, group of company to buy or sell usdt tokens using usd fiat is extremely suspicious.
I'm posting this hoping someone can show me some proof this is nothing to worry about. PROOF.